A bank that will not put up its prices has to find its growth somewhere else, and Capitec's results on Wednesday showed where it has been looking. Its headline earnings, the profit measure JSE-listed companies must report, with one-off items taken out, rose 19% to R9.5 billion in the six months to August, and it did not raise a single fee for the second year running. The results went out under the group's new name, Capitec Limited, which it has traded under since 26 August.
More clients, doing more
The first part of the answer is volume. Capitec has 26.6 million active clients. They made 14% more transactions in the half, and with no price increases, that took transaction and commission income up by a fifth, to R12.2 billion.
Costs grew more slowly than income. Operating expenses rose 5%, and Capitec now spends about 36 cents to earn each rand of income, down from 40 cents a year ago. That is what years of investment are supposed to buy, and Capitec says they are starting to.
The cellphone company inside the bank
The second part is everything Capitec sells that is not a bank account or a loan. Its fintech arm sells prepaid airtime, data and electricity inside the app, and runs Capitec Connect, a cellphone service that rides on Cell C's network, as FNB Connect does. That arm added R2.7 billion to headline earnings, 30% more than a year earlier. Funeral cover and credit life, meanwhile, lifted the insurance business's earnings by about a fifth, to R2.5 billion.
Capitec Connect is also where the bank looks least like a bank. Data used on it more than doubled in the half, calls from one Capitec Connect client to another are now free, and Capitec has started selling phones in its app, 27,000 of them in six months.
Where the extra caution shows
The loans are where Capitec is more careful than it was. Its personal loan book passed R100 billion for the first time, and it now sets aside about 8.4 cents a year against every rand it has lent, up from 7.9 cents. Capitec put the increase largely down to a bigger provision for losses it expects rather than ones it has already taken, after the US-Iran conflict pushed up inflation and brought a rate increase in May.
Business Banking is the smallest unit and the fastest-growing one. Business clients more than doubled, to 686,000, and the unit's earnings rose by about half, to R609 million. Its bad-debt ratio rose more steeply, to 3.4% from 2.1%, as it lent more to small firms without security, on the strength of a credit score.
Shareholders get an interim dividend of R31.10 a share on 26 October, 19% more than last year.
